Definition and Classification of the Chip Industry

Strong chips mean a strong industry; thriving chips drive economic growth—without chips, there is no security. In 2019, global semiconductor market sales reached $224.79 billion, with chip design accounting for 38.82% of total sales and chip manufacturing contributing 27.06%. Below is a definition and detailed analysis of the chip industry categories.

Currently, China's chip self-sufficiency rate remains low, with a significant shortage of core chips. High-end technologies have long been dominated by foreign manufacturers, making chips China's largest imported product—and posing a serious threat to the nation's security strategy. According to industry analysis data, in 2019, chip consumption in the Asia-Pacific region (excluding Japan) reached $288.6 billion, accounting for 60% of global chip spending. Meanwhile, China consumed more than half of the world's total chip demand.

Chips can be referred to as integrated circuits, as well as microcircuits, microchips, or simply "wafers/chips." In electronics, they represent a method of miniaturizing circuits—typically including semiconductor devices along with passive components—and are often fabricated directly onto the surface of semiconductor wafers. According to industry definitions and classifications, chips on the market are broadly categorized into three types: analog integrated circuits, digital integrated circuits, and mixed-signal integrated circuits (which combine both analog and digital functionalities on a single chip).

1. Analog Integrated Circuits

Analog integrated circuits are primarily analog circuits composed of components such as capacitors, resistors, and transistors, integrated together to process analog signals. There are numerous types of analog ICs, including operational amplifiers, analog multipliers, phase-locked loops, and power management chips, among others. The key circuit elements that make up analog integrated circuits include amplifiers, filters, feedback circuits, reference voltage sources, and switched-capacitor circuits.

2. Digital Integrated Circuits

A digital integrated circuit is a digital logic circuit or system created by integrating components and interconnections onto a single semiconductor chip. Depending on the number of gates, elements, or devices included in the digital integrated circuit, these circuits can be categorized into Small-Scale Integration (SSI), Medium-Scale Integration (MSI), Large-Scale Integration (LSI), Very-Large-Scale Integration (VLSI), and Ultra-Large-Scale Integration (ULSI) circuits.

3. Mixed-Signal Integrated Circuits

Mixed-signal integrated circuits are often designed for specific applications, but they can also serve as versatile standard components. Moreover, designing mixed-signal ICs requires a highly specialized and meticulous approach, involving the careful use of computer-aided design tools. The chip industry’s definitions and classifications highlight that automating the testing of finished chips presents even greater challenges compared to testing conventional ICs. Teradyne and Agilent Technologies are both leading suppliers of test equipment tailored specifically for mixed-signal chips.

According to data from the China Semiconductor Industry Association, from January to December 2019, China's manufacturing sector achieved sales of 114.73 billion yuan, representing a year-on-year growth of 27.6%. The design industry recorded sales of 179.14 billion yuan, up 22% compared to the previous year, while the packaging and testing sector reached 152.28 billion yuan, growing by 19.10% over the same period. China's integrated circuit industry has thus established a development model characterized by the parallel advancement of chip design, wafer manufacturing, and packaging/testing—each evolving relatively independently.

Currently, due to limitations in funding and technology, China's domestic chip manufacturing companies remain few in number, small in scale, and their products lag behind. In 2019, among the top three domestic integrated circuit manufacturers in China, only SMIC was a truly homegrown enterprise—still maintaining a significant gap compared to international leaders like Samsung, SK Hynix, and Intel. However, in chip design and packaging/testing, numerous outstanding domestic companies have already emerged. That concludes our definition and classification analysis of the chip industry.